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Gold falls on US bond yield rebound, reducing bullion appeal

By Nakul Iyer

Oct 15 (Reuters) – Gold prices fell on Friday on a rebound in US Treasury yields, though a weak dollar helped put the precious metal on track to its best week since late August.

* At 1101 GMT, spot gold was down 0.8% at $ 1,780.76 an ounce, while gold futures were down 0.9% at $ 1,782.60 an ounce.

* Benchmark 10-year bond yields were recovering from the low of more than a week hit Thursday, diminishing the attractiveness of gold by increasing its opportunity cost.

* “Expectations are growing that the Fed and other central banks will tighten their monetary policy, which should maintain support for yields, and when yields rise, gold tends to suffer,” said Fawad Razaqzada, an analyst at ThinkMarkets.

* “However, investors are likely to expect only a moderate tightening from the big central banks, which shouldn’t be a big problem for gold as investors hedge against high price levels,” he added.

* Gold is often viewed as a hedge against inflation, although a reduction in stimulus and higher interest rates boost bond yields, raising the opportunity cost of owning non-interest bearing bullion.

* The gold metal is on track to end the week with a 1.4% improvement amid a weakening of the dollar index, which lowers the cost of gold for buyers with other currencies.

* In other precious metals, spot silver fell 1.3% to $ 23.23 an ounce, but was heading for its first weekly gain of the last seven; platinum was down 0.5% at $ 1,050.24; and palladium was up 0.4% at $ 2,136.55.

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